Connecticut plans to join Ohio in suing credit rating companies for "negligent, reckless and incompetent work" in grading debt purchased by state pension funds, according to Attorney General Richard Blumenthal.
Connecticut and "a number of other states" are preparing legal action against Standard & Poor's, Moody's and Fitch Ratings, Blumenthal said Wednesday on Bloomberg Television. Ohio Attorney General Richard Cordray sued the debt raters this month on behalf of five Ohio public employee retirement and pension funds, saying "improper" ratings cost the funds more than $457 million.
The state actions come amid criticism of the ratings services by investors and lawmakers including Senate Banking Committee Chairman Chris Dodd, who has said the companies wrongly assigned top credit rankings to U.S. subprime-mortgage bonds just before that market collapsed in 2007. "They gave triple-As to financial instruments that deserved much, much less," Blumenthal said. "They were the enablers to this structured finance debacle."